FTX Lawsuit Targets Crypto.com for $11 Million in Ongoing Bankruptcy Dispute
Bankrupt cryptocurrency exchange FTX has initiated legal action against Crypto.com, aiming to recover approximately $11 million from a locked account associated with its former sister company, Alameda Research. The lawsuit is part of FTX’s broader strategy to recoup funds lost in its collapse, marking yet another high-stakes legal skirmish in the ongoing FTX bankruptcy process. Filed on November 8, the suit alleges that Crypto.com has improperly retained funds held in a specific account opened under the alias Ka Yu Tin, also known as Nicole Tin, which FTX claims was controlled by Alameda.
A Complex Web of Account Holders and Shell Companies
FTX revealed that Crypto.com had also filed claims against the bankrupt exchange for over $18 million, further complicating the proceedings. According to FTX, this specific Alameda account, opened under an alternate name, was part of a pattern where Alameda reportedly used shell companies and employees’ names to mask its trading activities on various platforms. Despite the account being registered under a different name, FTX alleges it was fully funded and controlled by Alameda, a practice it claims was commonplace for the firm.
Crypto.com’s Response: Locked Accounts and Legal Stalemate
Since Alameda filed for bankruptcy, Crypto.com reportedly locked the Ka Yu Tin account, denying FTX administrators access to the $11 million balance within it. Despite repeated attempts by FTX to gain access, Crypto.com allegedly declined these requests, citing a mismatch between the account’s registered name and the individuals seeking access to the funds. FTX claims it has provided sufficient evidence, including court-approved documentation, explaining the unique circumstances of the account ownership and clarifying its connection to Alameda. However, Crypto.com remains unresponsive, according to FTX.
million
Affidavit from Alameda’s Former CEO Backs FTX’s Claims
To support its claims, FTX submitted a sworn affidavit from Caroline Ellison, former CEO of Alameda Research, affirming that the Crypto.com account in question was indeed opened on behalf of Alameda affiliates or related individuals. Ellison further stated that Alameda always considered the assets within these accounts to belong to the firm, reinforcing FTX’s argument that the funds should rightfully be returned to Alameda’s creditors.
In its filing, FTX emphasized:
“The assets in the Alameda Account, valued at approximately $11.4 million as of the Petition Date, are not of inconsequential value or benefit to the estate and must be returned to the Debtors.”
A Larger Legal Maneuver: Linking to Crypto.com Parent Companies
Beyond the immediate dispute, FTX administrators are now attempting to leverage claims filed by companies affiliated with Crypto.com’s parent entities, Foris MT and Iron Block, as potential bargaining chips. Foris MT and Iron Block have separately filed claims totaling $18.4 million and $237,800, held in FTX.com accounts before its collapse.
FTX has requested that these claims be deferred until Crypto.com releases the assets held within the Alameda-associated account, arguing that Crypto.com’s refusal to unlock the account has hindered FTX’s efforts to retrieve necessary funds for its creditors.
Seeking Additional Relief and Legal Costs
The suit goes beyond the $11 million principal in the locked account. FTX is also pursuing recovery of associated legal costs incurred during the process, as well as additional relief measures. The defunct exchange argues that Crypto.com’s non-compliance with court-approved documentation and refusal to communicate directly with FTX administrators constitutes an unjust barrier to its bankruptcy recovery efforts.
Crypto.com’s Broader Implications: More Than Just a Legal Battle
The lawsuit underscores the complex and often murky landscape of cryptocurrency trading practices, where aliases, shell companies, and hidden accounts can complicate financial oversight. This case has put a spotlight on Crypto.com’s practices, as well as on the broader crypto industry’s standards of transparency and accountability. For FTX, the lawsuit could represent a crucial step toward repaying creditors and attempting to restore its reputation, although the road to recovery remains long and fraught with similar legal entanglements.
In the grand scheme, FTX’s effort to retrieve assets is part of a larger struggle to reclaim billions lost in its abrupt downfall. As the case unfolds, industry watchers continue to monitor these proceedings closely, given the far-reaching implications for crypto exchange operations, regulatory oversight, and the accountability standards expected of platforms handling billions in customer assets. The outcome could set significant precedents for future asset recovery cases and governance practices within the cryptocurrency ecosystem.
